While the dollar is losing ground against the euro, the pound, and other risk assets—pressured by ongoing large-scale FX interventions for the yen—Treasury Secretary Scott Bessent said the Trump administration will seek to push a plan to reduce the federal deficit through Congress before year-end if Democrats win a majority in either chamber in November's midterms.

The logic of the timing is explicit. "We would have to rush that through a lame duck as opposed to being able to take more time," Bessent said, referring to the roughly two-month window between the November 3 vote and January 3, 2027, when newly elected members take office.

The remark contains an admission that merits attention: The Treasury is publicly preparing for the ruling party's defeat and planning to pass a major fiscal reform through the outgoing legislature. Republicans currently control both chambers; losing either would allow Democrats to block the president's legislative agenda for the remainder of the term.

The scale of the task is daunting. The Congressional Budget Office estimates the US government will spend almost $2 trillion more than it receives in revenues this year. The deficit has widened in recent years because of pandemic spending under the first Trump administration and subsequent Biden measures and because of the current president's own legislative priorities, including his flagship tax bill.

The causal chain from the fiscal picture to markets runs directly and is already visible. A growing deficit requires more borrowing; an increased supply of long-dated debt pushes bond prices down; long-term yields have reached multi-decade highs; and rising interest service costs further worsen the deficit. Richmond Fed president Tom Barkin has described this mechanism as a looming reckoning, without specifying a timeline.

Bessent's response has been unconventional, and the effect has been telling. The Treasury's August expansion of long-term buybacks briefly lowered yields, but by early September 30-year yields were back near 5.28%, essentially erasing the earlier move. Bessent has also intervened in support of the Japanese yen and this week even publicly told traders to "trade against me," citing what he called inside information, a comment that weighed on the dollar.

That reveals the fundamental weakness of the approach: market interventions treat the symptom, while the root cause is the fiscal trajectory—and the failure of August's buyback gives that lesson stark clarity.

The most revealing element of Bessent's statement was what he did not say. He did not disclose whether the deficit plan would rely on cuts to health and social programs, such as Medicare and Social Security, or on tax increases. The omission is telling, because both options are politically toxic and account for the bulk of discretionary spending that can realistically be reduced.

A technical picture for EUR/USD suggests that buyers should focus on taking 1.1650. Only that will open a path to test 1.1670. From there a run to 1.1690 is possible, but doing so without support from major players will be difficult. On the downside, I expect any serious buying to be only around 1.1635. If buyers are absent there, it would be prudent to wait for a fresh low at 1.1610 or to consider long positions from 1.1580.

A technical picture for GBP/USD unveiled that pound buyers need to clear the nearest resistance at 1.3565 to target 1.3585; breaking above that level will be challenging. The farther target is 1.3600. On a decline, bears will attempt to seize control of 1.3530. If they succeed, a break of the range will inflict a serious blow to bulls and push GBP/USD toward 1.3510 with a prospect of extending to 1.3480.